Book Reviews of:
When Genius Failed; the rise and fall of Long-term Capital Management by Roger Lowenstein &
Monkey Business; swinging through the Wall Street jungle By John Rolfe and Peter Troob

When Genius Failed: The Rise and fall of Long-Term Capital Management by Roger Lowenstein

The book tells the story of long-term capital management. It is the detailed history of how a group of elite investors who called themselves the ‘LTCM’ (Long term capital management) contributed to the rise and fall of a hedge fund that brought the financial world to its knees when it lost $4 billion trading exotic derivatives. This short biography is in a nutshell about risk management, this is a gripping book of our era that tells the financial story of what happened to a group of intellectuals that believed that they could actually deconstruct risk and use virtually limitless leverage to create limitless wealth. The book describes the failure of Long term Capital management a hedge fund that was founded by John Meriwether. The infamous hedge fund that nearly collapsed the world's financial system, along with its many founders and advisors, including John Meriwether, David Mullins (former Vice Chairman of the Federal Reserve), Robert Merton and Myron Scholes (two esteemed academics in finance who won the Nobel price in economics in 1997).

John Meriwether was one of the top bond traders at Salomon Brothers and later became head of the fixed income securities department (Mortgage security and bond trading). But Meriwether, to use Michael Lewis' term, was a Big Swinging Dick, a Master of the Universe, an Uber-Trader. Meriwether was one of the first people on Wall Street to recruit mathematicians and physicists from schools and turn them into bond traders. Old instincts of market traders are been replaced by mathematical pricing models and the old Wall Street operators are replaced by academic financial theory, which provides a new framework that allows markets to function more efficiently. An example of this used in the book is the Black Scholes model for pricing stock options. The Black Scholes model has been accepted on a world level that E*Traders website quote the Black Scholes prices alongside the stock option prices. This emphasises the fact that modern trading is now entirely paperless and takes place in the cyberspace of computers and computer networks.

In Lowenstein’s book Chapter two is titled the ‘Hedge fund’ Lowenstein says that as far as securities are concerned there is no such thing as a hedge fund. ‘In practice the term refers to a limited partnership at least a small number of which have operated since the 1920’s’ The book shows how hedge funds allow freedom as they need not register with the Securities and exchange commission, and the hedge fund allows the contents of the portfolios to be kept hidden and allows the participants to borrow as much as hey choose. ‘In fat hedge funds are free to sample any or all of the more exotic species of investment flora, such as options, derivatives, short sales, extremely high leverage and so forth’ The book tells of how hedge funds operate with a select few, like ‘private clubs’ By law no more than ninety nine investors. The book gives a good insight into the history of hedge funds and a detailed overview of its characteristics. The book describes the reasoning behind the explosion of the number of hedge funds in the United States in 1990’s although no one knows the exact number. From the book my knowledge of a hedge fund is that a hedge fund is an investment fund for wealthy individuals or those that call themselves the ‘dollar millionaires’ and also for institutions like banks and pension funds. I also learnt that the number of investors in a hedge fund is limited as they are restricted in theory to only those who can afford the risks, which are associated with the hedge fund, unlike mutual funds, hedge funds are unregulated. The long-term capital management was a hedge...

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...﻿Overview
LongTermCapitalManagement (LTCM) was a hedge fund founded by John Meriwether in 19941. Meriwether was the former vice-chairman and head of bond trading at investment bank Salomon Brothers. Meriwether put together a high profile team of traders and academics in an attempt to create a fund that would profit from the combination of the academics' quantitative models and the traders' market judgment. Some of the high profile...

...Workshop 2, week 3
Syndicate 1
1. The collapse of Trio Capital demonstrated the way in which hedge funds and funds of hedge funds can be overly complex, unclear and lacking in transparency, particularly for retail investors.
a. Briefly summarise what has happened in the case of Trio Capital last year in 2012 in Australia
The collapse of Trio Capital is the biggest superannuation fraud in Australian history. Trio Capital...

...The Evolution of Finance: A Review of Peter Bernstein's Capital Ideas
The world of finance is ever-changing. Over the last century, the modern form of economic and financial theory as we see today has been developed and shaped by the minds of many. What we have come to know and accept as fact today were seemingly unheard of nearly fifty years ago. It is with the endless efforts of these like-minded scholars that gives us the opportunity to appreciate the tools...

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WhenGeniusFailed: Critical BookReview
In Roger Lowenstein’s book, WhenGeniusFailed: the Rise and Fall of Long-TermCapitalManagement, he discusses several factors that ultimately led to the success and failure of the hedge fund, Long-Term...

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LongTermCapitalManagement and the Hedge Fund industry |
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Introduction
The Hedge fund industry is surrounded by much controversy and debate; and that for many years. Lack of oversight, excessive returns, unclear impact on the market and more, are all subjects of concerns for market participants and the public. According to Priya Jestin on Hedge Fund Street, “on an average day, between 18 and 22...

...Lessons Learned From LongTermCapitalManagement
LTCM was selling liquidity as their fund structure was more similar to an investment bank than a typical hedge fund. When investors or issuers need to change their positions or risk exposure, they would go to an investment bank or dealer to buy or sell securities. In turn, the dealer would utilize the capital markets to offload the exposure. LTCM was often...

...Problem Statement
• Management accounting’s report fail to help manager make decision to reduce cost & improve productivity
• Lack of information to interpret real meaning of data
• Fall of management accounting that the improvement does not reflect with the changes business condition
Objective
• Identify the problem causes the fall of management accounting
• Solution to find a way to improve...

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